Hire Smart: Tips for creative agencies that outsource creative talent

By Jim Locatelli, Locatelli & Company, www.locatellicpa.com and Erica Conway, C2 Graphics Productivity Solutions, www.c2gps.com

How can creative entities rebound from the recession and improve their profit margins? As creative companies begin to expend resources and staff workloads increase, serious consideration should be made to staffing up for the peak demand periods with temporary staff from a well-recognized creative staffing/placement firm.

Beyond the advantage of creating billable multiples over the reasonable direct cost and avoidance of carrying staff during non-billable periods, working with a creative staffing agency solves a potential employee/independent contractor classification issue with the State of Wisconsin and federal government. All temporary staff placed through staffing firms are employees on the books of that firm and all taxes and payroll tax reporting are absorbed by the staffing firm.

With the relative availability of freelancers, many marketing and creative firms potentially put themselves at risk if they do not review the following ten points seriously with each freelance candidate. Several creative firms in the metro Milwaukee area have undergone audits by the Wisconsin Department of Workforce Development in the past year. The state of Wisconsin considers an individual an employee if they are unable to answer yes to at least 7 of the following 10 points of reference;

1. The individual holds or has applied for an identification number with the federal Internal Revenue Service.
2. The individual has filed business or self-employment income tax returns with the federal Internal Revenue Service based on such services in the previous year or, in the case of a new business, in the year in which such services were first performed.
3. The individual maintains a separate business with his or her own office, equipment, materials and other facilities.
4. The individual operates under contracts to perform specific services for specific amounts of money and under which the individual controls the means and methods of performing such services.
5. The individual incurs the main expenses related to the services that he or she performs under contract.
6. The individual is responsible for the satisfactory completion of the services that he or she contracts to perform and is liable for a failure to satisfactorily complete the services.
7. The individual receives compensation for services performed under a contract on a commission or per-job or competitive-bid basis and not on any other basis.
8. The individual may realize a profit or suffer a loss under contracts to perform such services.
9. The individual has recurring business liabilities or obligations.
10. The success or failure of the individual’s business depends on the relationship of business receipts to expenditures.

Beyond the employee/independent contractor classification issue, other reasons to work with a reputable staffing/talent placement firm include:

1. Saving time and money on recruiting.
2. Control project expenses with a competitive rate structure, often less than individual freelance rates.
3. Playing it safe with the government and allowing the placement firm to handle all of the payroll tax reporting and payroll taxes.
4. Quick turn around in finding qualified talent for rush projects.
5. Guaranteed technical and creative capabilities of hired talent.
6. Accountability and backup from a firm relating to individual performance.